I am guessing but I think what has happened is that, at the end of the linux installer,it either wrote the bootloader to your removable drive- (normally that doesn't happen as it goes on the "first" drive as identified by the installer). Inability to boot linux + GRUB error (this is the boot system used by the ubuntu family & others) occurred because the bootloader was missing?? I have never changed bootscripts myself, although intermediate users are OK with it.I suggest that, as a new user, you don't try just yet.
Windows XP normally (!) self-diagnozes problems. I'm no expert! But found windows so buggy that I made a ghost rebuild disk for every system I had, as I preferred clean install to sleepless nights.
Never mind that. Could you try a system restore (ie to the last date before the Linux install?) Try that first. If not, and you can see your files, and you don't want to spend ages, you may find a clean install is the best way. If you aren't backed up please do so as soon as you can.
If you want to dual boot, as you say, family use windows, you use Linux, I think you should reduce the size of your windows partition (which you do from the linux installer) to make room for Linux. The OS probably needs 5gB then allow another 5 for your files, depends how big the HDD is, what distro you want to use, what desktop, etc, etc. Then install to the HD. When you turn on, if all is well, GRUB gives you the option of Linux or windows. When in Linux, plug your external drive in and unmount it when done.
Don't get discouraged! To get you started you may find Debian Etch easier(all the installation notes are on Debian website but you'll find good material on dual boot here at LQ).
An advanced user would probably tell you how to fix what's broken rather than go in from scratch...
Anyway hope this helps-Phil